Although it is no longer mandatory, a company is always encouraged to adopt a constitution within the framework of good governance. The revision of the Constitution is important to adapt its specific needs at this time, anticipate future changes or challenges, resolve any inconsistencies and take into account possible shareholder agreements. Directors and shareholders will have fewer problems if issues related to the company and its rules are clearly set out in a consolidated document that can be amended to reflect the well-being of the company. There were competing arguments as to the legal nature of this right of appointment under the shareholders` pact. Malaysian Shareholder Pact Lawyer`s Drafting Tips – Do shareholders of a Malaysian company need a shareholder pact? To answer the question above, one would have to estimate what a shareholders` pact is; and what repressive acts are within a company. There are no laws governing how the shareholder contract should be developed. However, the parties should comply with certain provisions of the Malaysian Corporations Act that cannot be repealed by such a shareholder pact. Rights of the first refusal – a requirement for a shareholder to offer the other shareholders of the company the right (but no obligation) to acquire the shares before the sale or sale of shares to a third party. Shareholder agreements are commonplace and can very well be used to safeguard the interests of all affected shareholders, particularly minority shareholders.
Even if a company has not begun to enter into a shareholders` agreement, shareholders have nothing to do to enter a company at a later date. While it is technically possible to design a shareholder contract of its own (especially if you know exactly what you want from it), we strongly advise you to consult a lawyer or legal advisor to advise you on the possible impact of what is taken into account in a shareholders` pact. Existing shareholders can regulate the entry of a new shareholder into the company by limiting the transfer of shares. The Malaysian Companies Act 2016 stipulates that a private company has a restriction on the transfer of its shares. This is one of the opposite characteristics between a private company and a public company in which these shares are freely transferable to a public limited company. However, the Companies Act 2016 does not specify the nature of the restriction or the extent of the restriction required. A good time to implement the shareholders` pact is that you first create your business and distribute the first shares. It is also good to make sure that your shareholders understand the agreement and the company`s expectations. You can discuss the terms and expectations with them, but always make sure you get a lawyer who will help you design the agreement yourself. Shareholder agreements are voluntary and consensual, they must be fair and reasonable for all. Dividend policy – How the company should declare its dividend.